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US banks shaken by biggest deposit withdrawals since 9/11

US Federal Reserve is reporting a major
deposit withdrawal from the nation’s bank accounts. The financial system hasn’t
seen such a massive fund outflow since 9/11 attacks.

­The first week of January 2013 has seen
$114 billion withdrawn from 25 of the US’ biggest banks, pushing deposits down
to $5.37 trillion, according to the US Fed. Financial analysts suggest it could
be down to the Transaction Account Guarantee insurance program coming to an end
on December 31 last year and clients moving their money that is no longer
insured by the government.

The program was introduced in the wake of
the 2008 crisis in order to support the banking system. It provided insurance
for around $1.5 trillion in non-interest-bearing accounts with a limit of
$250,000. It was aimed at medium and small banks as the creators of the program
believed bigger banks would cope with the crisis themselves.

So the current “fast pace” of withdrawal
comes as a surprise to financial analysts because the deposits are slipping
away from those banks which supposedly were safe. Experts expected savers in
small and medium banks would turn to bigger players come December 31.

There are a number of reasons behind this
unpredicted fund outflow. Some experts believe it has to do with the beginning
of the year when the money is randomly needed here and there. Others have
concluded the funds are getting down to business and being invested.

Another set of data from the US Federal
Reserve shows some deposits may have moved within the banking system from one
type of account to another.